Flailing OnLive Sold For Only $4.8m

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Oh crikey. You may remember in August that online game streaming service, OnLive, was in a spot of bother. Stories of impending bankruptcy came on the heels of a company that had previously been valued at an extraordinary $1.8bn. The next day news came that despite lay-offs, a buyer had been found, and “substantial investment” was being put into the company to keep it going. But what’s been revealed today, reported by the BBC, is that it was sold for only $4.8m. That would be 1/375 of its previous estimated value. Or 0.27%.

Two billion seems likely to have been a bit of a silly figure. The main rival to OnLive, Gaikai, was sold to Sony for a considerably smaller $380m this year. But still, you know, 80 times more than OnLive received.

This figure was discovered by Mercury News, who got hold of a letter detailing the deal, intended to be seen by creditors. It explains that the company was in at least $18.7m worth of debt, meaning that creditors will only receive 26 cents per dollar they’re owed.

It seems things were getting pretty desperate, with OnLive ready to liquidate its assets, stopped at the last moment by the seemingly paltry offer from venture capitalist Gary Lauder. For just $4.8m he picked up, well, a big pile of debt, but the belief that the problem was a lack of initial investment. Which is, well, bold. So a company that likely won’t be paying back its shareholders after the first flop, is now planning to borrow even more. I do not understand money.

So for now, at least, OnLive continues, and should hire back 50% of its former staff. However founder Steve Perlman has chosen not to stick around. Which still leaves the rather big question: is streamed gaming the future?

On some level it seems hard to imagine how it couldn’t be. With fast enough internet tubes, it allows anyone to play a game at the very highest specs with the minimum of technology. It makes the need for upgrading systems or consoles defunct, while removing all possibility of piracy. It’s the ultimate form of always-on DRM. And thus it also loses the faintest wisp of the concept of ownership that we may still have. So you can see why it’s a confused mix of benefits and serious concerns. But all this aside, it’s still hard to shake off the idea that it’s just too early. The average internet just isn’t good enough to use it usefully, and we’re far too far at the wrong end of a console cycle for people to feel that necessary technology is out of their reach. If it’s going to have its day, I’m sure it will still be a while away. How about you?

While the technology is interesting and innovative I can’t say I’m disappointed. Whatever way you want to look at it streaming gaming does entail less control for the player and is substantially more in the “service” camp rather than “sales”, with all the loss of rights and control that that implies.

Not to say that it wouldn’t be cool to stream some stuff, to some devices, sometimes. However I, and I’m sure many others, are rightfully dubious about putting all that control in the hands of a service provider and probably by extension the publishers… and we all know that publishers value their bottom line more than the integrity of the medium, or players rights, or creativity, or in fact anything that doesn’t directly translate into maximum revenue.

That was a very well reasoned point and I completely understand the backlash to a degree, but I don’t understand some peoples assumption that you will be forced to use cloud gaming or that it will be the only option available.

Infact I think cloud gaming (at least initially) will have its own market that involves playing to its strengths. Reflex based gaming should be out for starters due to the latency, maybe games in the style of the recent Walking Dead series but with really souped up graphics?

Because the technology heavily incentivizes those with financial interests in gaming (i.e. publishers) to make cloud gaming the only gaming. Why? Apple. Walled garden, etc. – the same tired old argument about exerting more control over the experiences of your consumers.

Yeah but you could argue the same about Apple/mobile gaming etc but it is only one facet of gaming, we have more choice than ever now, why would we assume another distribution method would create a monopoly?

First off this isn’t a distribution method, it’s a consumption method – there’s a difference. The “walled garden” style distribution methods already exist for PC games – Steam, Origin, and soon the Windows 8 Store. Obviously the walls of some of those gardens are higher and more impenetrable than those of others.

Why would be assume it would become a monopoly? Because it’s already happened – again, in the mobile space. Apple established the app-store business model used by *all* smartphone providers today. Why is it ubiquitous? Because it was hugely successful. It would only take one huge cloud gaming success story to propel it into the same ubiquity in the gaming world.

Luckily, infrastructure limitations in some of the biggest markets (e.g. the USA) mean that for the foreseeable future this sort of game-streaming can’t be the only way a game is released. It eliminates too much of the potential audience to be financially viable. Given the slow rate at which the infrastructure is improving, there will be a lot of other changes that will alter the dynamics of the game industry before that happens.

@Brun apologies if I didn’t articulate my point properly, but I meant that even though mobile gaming has arrived it exists as additional option and hasn’t monopolised all gaming, nor has impeded PC gaming we know and love.

Ok, just to clarify what I’m doing here, I’m using the ubiquity of the app-store distribution model on smartphones as an analogy to a similar hypothetical ubiquity of the streaming consumption model within gaming. I am not talking about mobile games edging out all other forms of gaming. I’m talking about the app store taking over smartphones (which it has, every major smartphone OS has an app store), and using that to point out that cloud gaming could just as easily “rise to power” amongst gaming consumption platforms, because the financial incentives to implement the app store and cloud gaming are the same.

Well, yes and no. Cloud gaming, once it (and it’s host countries infrastructure) reaches a certain level of technical competence, does rather signal the end for all this high end consumer gaming hardware malarkey. There’s no point having a bonza 3d card and a killer CPU if what’s on your monitor is being rendered 100 miles away. Personally, I’m rather for that.

My personal Onlive experience was of only being able to play on the weekends, thanks to Virgin’s traffic management policy. It’s sad, but I always thought they were moving WAY too fast with their expansion – my 30Mbs connection was struggling and that was WAY above the UK average, so it just wasn’t a viable option for them.

I hate cloud gaming because its such a backwards step. Just as crowd sourcing and direct sales are freeing more and more developers from publishers along comes a new type of publisher trying to herd everyone back together. Onlive and Gaika are trying to protect the existing publishers by ensuring you can only make money if you’re in our club and you can only join if you sign up with these publishers.

Cloud gaming was never about the devs. It was never about the games. It was about publishers trying to hold on to a fracturing industry.

As much as I love the idea of cloud gaming for what it means for technical innovation, I’m beginning to realize that arguments like yours are absolutely right. At this stage, this is all about publishers locking us in by any means necessary.

Cloud gaming is the future, however, when it becomes truly capability-driven. That is to say, when we have a technology that we can’t run at home, like a quantum computing cluster, but have games that could make great use of it, then cloud gaming will become a viable option. I will sell my soul for a streamed gaming on a cloud-based quantum computer. Thats some time off, however.

We live in an economy of scales though. Har har. Point is though, individual developers, particularly “indie”, can’t afford to maintain all the hardware necessary for their audience to play their games streamed. Economies of scale means that massive demand for hardware(i.e, all of us needing computers) drives the price down. So developers would have to ‘play ball’ with the cloud providers in order to reach their audience. Meet the new boss, same as the old boss. Moot point though as it’s just not gonna happen. The mythical ‘good enough’ internet doesn’t exist and is no closer to existing now than it was 10 years ago. Best case latency scenarios haven’t improved much even if averages are coming down. On-live was destined to fail as the technology experts(software and internet engineers) predicted. The games media was caught in the hype giving favorable opinions of very sub-par experiences. Bamboozled by the novelty were they. Makes you wonder what’s gonna happen Nvidia with their recent heavy investment into cloud rendering…

This might be an interesting (if very long; 16.000 words!) read related to the subject of closed systems. It basically describes the history of Blizzard and the inception of the battle.net 2.0 in minute detail. And the author comes to a few very dark but strictly logical conclusions.

inovate? it feels like its to late then ahead. i mean if you are a console gamer, you probably own a current console who get most library of Onlive library. while a PC gamer probably know whats good for gaming hardware wice to play those game.

Yeah, for companies it is like the ultimate DRM, but it’s difficult to “force” something like this even with exclusives.

Imagine the problems it can cause: tens of thousands of players trying to play Diablo IV at the same time on Blizzard’s hardware, “Servers are Busy” would become “No GPUs available”. Also the response delay it has makes some types of games unplayable.

Looks more like they were taken in by that whole “cloud is the future” marketing BS. What exactly was OnLive trying to do? Saving the download time isn’t really a big feature and with consoles being as cheap as they are there’s no real need for a low cost low quality gaming device that comes with the additional disadvantage of being directly tied to your internet connection.

Remember the promises of cloud clusters allowing graphics far beyond what personal computers are capable of? Remember the promise of always being at the cutting edge without ever having to upgrade? In the end they couldn’t even run the games they offered at high settings. I wasn’t surprised but other people didn’t seem to see the weakness of those claims when they were first made. After all no matter how many buzzwords you throw at it you still need to deliver that computing power and that costs money. You can’t afford to allocate enough power for max settings (or even more if you want those “cluster computer grade” stuff) to all players all the time as you’d pay through the nose for the mainframes capable of doing that. Same for “never upgrade”, if they want to stay at the cutting edge THEY have to upgrade a whole lot. Games aren’t as flexible in their resource usage as supercomputer tasks, sticking ten weak graphics cards into a cluster still doesn’t make a powerful graphics card. So you need high end components which cost high end money even with bulk purchases. To uphold that whole promise you’d need to upgrade a lot more than a normal gamer would. Those upgrades must be paid for and without a monthly fee you won’t extract enough money from the gamers to pay for them. Except the monthly fee failed because consoles are cheap and cost no monthly fee unless you want bonus features.

Now look at Gaikai, they had a simple yet effective proposal: Use cloud gaming for demos. Downloading demos is pretty painful these days with the downloads taking several times as long as actually playing through the demo so eliminating the download time is a very useful service. A service that publishers wanting to market their games would be willing to pay for.

Also the visual quality they offer is not that great, you can see pixels as big as fingers sometimes, the delay is quite distracting too. As you said Gaikai is different, you can demo full versions of games by time limit only and instantly, actually usable and nice to be able to do.

I have no idea how they are doing it now, but I could imagine something like this working with custom built hardware. I could imagine it’s probably the dream of every engineer at Nvidia or ATI to break out of the ‘one graphics card per PC’ scheme and design just an infinitely scalable system of pure graphics power. No requirements on space and not much on heat production (you can arrange for all that in a server environment). They already have all basic components, they “only” need to put these together in a clever way. Though you would need a completely new set of software and drivers also, that’s probably the more laborious part.

I reckon the majority of people who read RPS would prefer to stick with their own hardware, but that’s not a good reason for something like OnLive not to exist. I think a lot of the backlash is misplaced. Cloud gaming isn’t targeted at the hardcore pc gamers, rather it’s intended to open up the platform to anybody with a decent internet connection and a tv/tablet/phone/etc.

This isn’t an all or nothing scenario where all pc games are suddenly magically migrated to the cloud. If/When cloud gaming eventually becomes viable, developers will be making games targeted for the platform, and the audience that uses the platform, which is likely to be mostly casual mobile users, not people who have invested in actual gaming pcs.

That’s a great example for my point actually. We’ve gotten tons of great games that aren’t generic shooters. From AAA stuff like Bioshock and Dishonoured to indie games, the kickstarter revival, eastern european devevlopers and so on. CoD’s popularity hasn’t enacted some sort of apocalyptic gaming doomsday scenario. Publishers don’t act in unison and all change their marketing strategy at the same time. They are also capable of catering to more than one niche at a time.

It took Amazon 8 full years to make a profit, and they’re doing pretty well nowadays. It’s sometimes worth sticking out the bad times to make sure you’re already a big player when the market finally does explode into life.

No, you’ve broken even. Whereas Amazon made colossal losses for most of its early life, so the comparison isn’t exactly fair. OnLive has only been around 3 years too, and 3 years after being founded Amazon only pulled in revenues of $16m.

I don’t really see your point, though. I seriously doubt OnLive doesn’t have any revenues, their problem is just they’re spending more money than they’re bringing in to try and get early-mover advantage over their competitors in a market that isn’t mature or developed yet. Pretty much exactly what Amazon did (but they succeeded).

That’s not how accounting works. The 200 million is the company’s net income (“profits”) after expenses, taxes, interest, etc. If you then decide to reinvest it all in new properties, you’re turning that money into retained earnings rather your own salary/dividend, but it still represents a profit.

OnLive was great in some areas, but in allot of others, the bandwidth wasnt there or rather the latency to the servers were to high which caused mouse/input lag. Then there is that monthly subscription on top of the purchase of the game. Then if they do ever close shop, where is my games I paid for? No thanks and no thanks. Lack of tech and bad business model.

I still don’t understand who their target demo was. People who wanted to play PC games without having to build/buy a PC? Picking out parts and building your own rig is as big a part of PC gaming as the actual games themselves.

I disagree on building a PC being an essential part even though I never bought a pre-built PC. Still, if you want a cheap and cheerful option for playing games there’s consoles for that, they aren’t expensive and you probably want to have one just for all the games that never appear on the PC anyway. They also (usually) don’t depend so heavily on your internet.

-Students who only own a laptop with integrated graphics
-People who own tablets
-People who own smartphones
-Basically anybody who can get by without a computer, now that facebook/personal banking/etc can be done without one.

It’s easy to forget that pc gamers are only a small part of the population when you only visit gaming sites!

I know that sounds harsh, but further transition into “the cloud” is absolutely the wrong direction for gaming to take. Harsh examples like this will make companies wary of pursuing similar efforts in the future. I said the same thing about social/Facebook games and Zynga – a harsh lesson that will (hopefully) save gaming from a long and expensive trip down the wrong path.

Eventually pretty much everything we do will be accessed from some sort of cloud, but not yet. People aren’t ready for it yet, but with smartphones leading the cloud charge these days people will eventually become used to it and then something like OnLive might be successful.

We have to wait for the generation of people who are privacy nuts to die off, then we’ll be ready for this kind of stuff.

First World Privilege? I guess you’re lucky enough that you don’t live in a place where you can be publicly shamed, arrested or killed because of what you read online* or who you associate with. So am I, but that doesn’t mean I’m going to pretend privacy is something only “nuts” care about.

Hell, even in the US some employers would love to use your facebook or gaming activity as an excuse to fire you.

Privacy’s important, even if you don’t personally, immediately and obviously benefit from it right now.

And in the UK, it is all too common now for prospective employers to look you up online and use the information that they find (which may or may not be relating to you) to decide whether to offer you a job or not after an interview.

I’m guessing the OP has never had an online stalker either. You know, a proper phone breather, window smashing, facebook graffiting, false accusations to the police, attempt to rape you in your back garden type stalker. It makes you appreciate all the efforts of the “privacy obsessed” online community. They helped me get my life back.

@Sheng-ji: Heck, with would-be employers in the US these days, there are problems with them demanding your email and Facebook passwords during the interview! California specifically passed legislation to ban such demands, but there are plenty of states where it still goes on.
Certain Christian universities in the US that have had this same policy created problems with hackers getting access to their poorly secured database and using that information to send, in the guise of the students, obscene emails, get access to the students’ Amazon (etc.) accounts and order up sex toys, etc. (All of which were grounds for expulsion from those schools, naturally.)

@Mordsung: It has everything to do with privilege. You’re privileged in that no one is collecting that information to be used against you to deny you jobs, have you imprisoned, harassed, beaten or even murdered by thugs or state agents, etc. Those very much are issues for some people in some parts of the world.

But since everyone seems to be sharing, I’m not even 30 and grew up inside a dictatorial regime, trying to teach how great the country and the leader is in school. Listening to western radio or reading western newspapers and similar was forbidden, it was rather hard to even get out of the country and at one point when my mother was drunk and said something she shouldn’t have she was nearly taken by “secret police”. And this wasn’t a century or even half a century ago and while it turned to the better in that part of the world similar things are still going on in the Middle East or Africa, with bloggers and people expressing dissenting opinion, going to demonstrations or writing the wrong things on their Facebook/Blog being arrested, tortured or sometimes even put to death: link to in.news.yahoo.com I’m sorry if I don’t have any tolerance for your kind of disgusting bullshit. Don’t think things can’t change and happen to wherever you live.

Mordsung’s complete lack of empathy for anyone is quite intriguing. I wonder which psychiatric pathology he has? We should probably discuss it. It’s not like he’d ever feel shamed about it, since he pretty much stated as such.

Xvaltan, I was just about to say the same. Not being able to feel shame and thus lacking a sense of social conscience makes him sound more like an egomaniacal sociopath than some superior form of human he seems to consider himself to be.

In short, Morasung, you’re making a fool out of yourself. Privacy is a well-established aspect of the human condition and a fundamental human right recognized by, say, the Universal Declaration of Human Rights and nearly every national constitution in the world. Your mindless ideas are an affront not only to the concepts of human dignity and respect, but to a number of other inalienable human freedoms and rights as well. I mean, one could arguably come up with better arguments for implementation of state censorship and Nazi-type eugenics programs than for getting rid of all privacy rights altogether. That’s how insane your views are.

Seriously? OnLive was just an ancient idea repackaged ON THE INTERNET!!! It’s just the old dumb terminal and mainframe model that was eliminated by the personal computer. With the falling PC prices together with climbing power it’s just inefficient to buy a massive central computer and tether dozens of terminals to it when you can just buy cheap computers that add up to way more power than you could get from a central system for that much money. Smartphones aren’t inviting cloud gaming either because their data connection is their weakest link (well, that and controls), they’re becoming more and more powerful, increasingly eclipsing the power game devs can actually afford using on phone game budgets (you won’t get Crysis on a 1M$ budget even on the best hardware). There’s no value in outsourcing processing for them because it’s far more demanding to shove that data over the network than to compute it locally especially with bandwidth caps.

Bingo. It’s an attempt to unwind the Personal Computer revolution. The only things it can offer is control to the producers.

The same goes for Cloud in general; it’s a way to make the vendor lock-in tighter, and reduce deployment complexity for someone other than you, and switch to a subscription model so that “Office 97 still works just fine for my needs, I don’t see why I need to pay for an upgrade” no longer applies.

I don’t think this was ever going to be the future. A good gaming PC or console box are not the super expensive barriers to entry they once were. That was the one positive OnLive had, the lack of set up cost, but it’s not really that big of a positive relative to current hardware costs. Gaming lap tops are about the only area where it was a clear winner on price, but people buy those for mobility which OnLive did not provide. Publishers might keep trying to push streamed gaming at some point, but I don’t think most gamers want it, and we certainly don’t need it.

I think it’s more correct to say that it’s part of the future, the idea that we will have completely cloud-based gaming (or anything) any time in the next decade is nonsense. The reason Gaikai did better is because they positioned themselves as an adjunct to current gaming consumption, rather than the replacement that onlive was trying to be.

yeah people still don’t get that about steam – it’s not drm at all, it’s a pirates dream come true. nevermind torrents, with a cracked version of steam you can download games you don’t even own directly from valve’s servers. that’s really taking the piss.

Er, except Steam isn’t cloud gaming? OnLive’s big idea was that instead of a PC you’d use a dumb terminal while OnLive does all the computing for you but that turned out to be a dumb idea. Steam still requires you to supply your own computing power to run the games.

For example Steam games keep working even if your internet connection is flakey (unless they run on that DRM Ubisoft loved so much), OnLive would crap out then.

Could anyone explain to me who ‘values’ a company like OnLive (or Zynga as another example) at over a billion dollars and how they come to that conclusion? It seems so stupidly absurd I question who even believes in numbers like that.

I think the problem here is that they addressed COMPLETELY the wrong audience.

They were out trying to sell to people who own 360s/PS3s and gaming PCs – when their market is people who DON’T own those.

If their micro-console was on-sale in Currys for £40 or ‘free’ with a game or a telly or something, they’d have a massive installed base who’d perhaps even have taken a subscription or bought a few games.

As it is tho, they have a service which works better than ANY of the naysayers said it would BUT no customers…

I found it pretty funny when OnLive got me to sign up in order to try out FTL. Never managed to so much as sign in on my DSL. “Your Internet connection is not sufficient to use this service” or something, for a week. I do not have enough bandwidth, evidently, to play this sprite-based, highly-compressible, infinite-pausable strategy game.

I’m sure they sold the whole company, so probably all the games are still available to the people who bought them…
But… I’m curious to see what happens when they do finally shut down. My bet. Nothing. Sorry everyone, we shut down. Those games you bought are no more.
Some people have romantic thoughts about refunds, or that they will mail you a disc or something. Nah, it’s just gone. All those games. Poof. Wouldn’t be surprised if it happened with Steam one day. Just hopefully they will still have that “Backup” option still.

Wow, if only we could have predicted such a turn of events. Oh wait, we did.

“On some level it seems hard to imagine how it couldn’t be.”

I find it hard to imagine how it could be. I’m sure the industry would love a streaming system and a direct channel to our wallets while giving as little as possible in return, but do the people who pay want this?

The lag, oh god the lag. Once the server receives data (if you’re playing online) it has to then forward it to you, which then you respond to and forward it back to the server, which then forwards it to wherever you’re playing. You’re talking about a quadruple jump in latency. Double simply to respond. If you’re cruising along at 20ms that is a lot less noticeable, but chances are people aren’t. Basic input just to move your character is very noticeable.

Video quality.

Number one reason it was stillborn is bandwidth caps. Getting a 1080p experience you’re streaming every time you play a game (for some people 8 hours a day), that’ll eat your bandwidth cap in a few days. This is something no amount of technology will get around as it’s a fixed part of the market. Unless Onlive builds their own infrastructure, a-lah google, no amount of cash injection will fix this.

The best thing Onlive could’ve done was build a bunch of micro-datacenters instead of one big data center in TX or where ever it’s cheap. Pretty much one per state, so the games have low latencies to onlive, onlive lowers it’s bandwidth costs, and possibly even link onlive centers for extremely fast play. Of course they would’ve done this if they were smart. Possibly even rolling out a ‘extreme’ package to local gamers in the form of fiber lines bring latency down below 10ms for even online gaming.

Honestly though, the disconnect between when you push a button and when the screen reacts is huge. I personally would never want to play cloud gaming unless we’re talking about 1ms response time.

One of the insider-accounts I read in august was that Steve Perlman was a core reason OnLive’s failure, throwing ego-based temper tantrums to the effect that he refused to have a large variety of games available in the OnLive service, such as Dragon Age in the wake of EA allowing some other streaming service to stream a demo. Steve wanted exclusivity for his service of any type of game streaming.

It was certainly only one side of the story, but it did make it look as though Perlman was instrumental in the failure of a his own company that should at least have rivaled Gaikai’s buyout valuation.

I bet Dave Perry is glad he sold Gaikai when he did. I can see Sony running with such a service for their SmartTV devices, but to replace PC / console gaming with OnLive was just never going to work. People complain about mouse smoothing, OnLive’s latency was never going to have a chance. Still, the tech was pretty impressive for what it was able to achieve. I’m sure there is a better application for it.